An extraordinarily dubious rumor from China suggests that Apple has been unable to solve critical issues in the manufacturing of the Apple Watch's flexible OLED display that have driven yields perilously low, while assembly partner Quanta is said to be experiencing significant issues on its production lines due to the device's small size.

Just 30 to 40 percent of the Apple Watch OLED panels rolling out of display partner LG's factories are usable, according to UDN, which has led Apple to cut its launch production targets from up to 3 million per month to around 1.5 million per month. The report was first noted by GforGames.

Manufacturing the plastic-backed flexible OLED panels is a vastly different process than the one used for glass-backed panels, the report says, requiring new methods of pulling a vacuum between the panel and the substrate. Traditional water jet vacuum pumps are said to be unsuitable, causing humidity issues.

Problems at contract manufacturer Quanta Computer, the lead assembler for the Apple Watch, are also thought to contribute to the lowered forecast. Quanta, primarily known as a computer assembler, is reportedly having trouble adapting its processes to suit the much smaller Watch.

While dramatic, this is a highly unlikely scenario. LG is among the companies that first invented flexible OLED displays, and has been shipping them at moderately high volumes for years, notably in its own G Flex handsets.

The rumored assembly problems are even more farfetched, given Apple's recently-demonstrated prowess as a manufacturer. The company is known to be deeply involved with process and tooling on its production lines, and has shown its ability to build and ship huge quantities of devices time and again with the iPhone.

This is the second report of Apple Watch yield issues to surface in as many weeks. Last week, Cowen and Company analyst Timothy Arcuri signaled that yield issues had prompted Apple to add longtime partners Foxconn and Samsung as Apple Watch suppliers.